Quick Facts

Economic freedom remains severely repressed in Turkmenistan. The country’s rankings in the categories that measure respect for the rule of law are among the worst in the world. Corruption is pervasive, and property rights are ignored.

Economic Freedom Snapshot

2016 Economic Freedom Score: 41.9 (up 0.5 point)

Economic Freedom Status: Repressed

Global Ranking: 174th

Regional Ranking: 41st in the Asia–Pacific Region

Notable Successes: Open Markets and Fiscal Freedom

Concerns: Investment Freedom and Financial Freedom

Overall Score Change Since 2012: –1.9

Freedom is nearly nonexistent in the investment sector, as the six state-owned banks hold over two-thirds of all assets and control the allocation of credit. The public sector dominates labor markets, and the non-transparent and erratically enforced regulatory system virtually precludes private-sector entrepreneurial activity, except activity that is small in scale and conducted informally.

Background

In 2012, President Gurbanguly Berdymukhammedov was reelected to a second five-year term with 97 percent of the vote in elections that international observers regarded as flawed. The presidency tightly controls the judiciary, the legislature, the economy, social services, and the mass media. Berdymukhammedov’s policies are somewhat more open to the world than those of his predecessor, President-for-Life Saparmurad Niyazov, but the government still tends toward isolationism. Turkmenistan has intensive agriculture in irrigated oases, sizable oil resources, and the world’s sixth-largest natural gas reserves. Berdymukhammedov has encouraged some foreign investment in the energy sector, especially from Russia, China, and Iran. Like those of other Central Asian republics, Turkmenistan’s economy has been negatively affected by the economic slowdown in Russia.

Corruption is widespread, with public officials reportedly forced to bribe their way into their positions. The judicial system is subservient to the president, who appoints and removes judges without legislative review. The legal system does not enforce contracts and property rights effectively. Judges are poorly trained and open to bribery. All land is owned by the government, and other ownership rights are limited.

The personal income tax rate is a flat 10 percent, and the corporate tax rate is 8 percent. Other taxes include a value-added tax and a property tax. The tax burden equals 17.4 percent of total domestic income. Government spending equals 18.1 percent of total domestic output. Budget surpluses have been recorded, and public debt remains below 20 percent of GDP. Revenue from gas exports to China has sustained government spending.

The regulatory system is highly arbitrary, and enforcement is inconsistent. The public sector provides most jobs, and the informal sector remains an important source of employment. Turkmenistan was the only country in the world to provide its citizens with gas, electricity, and water free of charge, but high budget deficits and lower global oil and gas prices forced the government to cut those subsidies substantially in 2014.

Turkmenistan’s average tariff rate is technically 0 percent, but non-tariff barriers restrict imports. It is illegal to import cars that are more than five years old. Bureaucratic barriers interfere with foreign trade and investment. Foreign exchange accounts require government approval, as do all payments and transfers. The underdeveloped financial system remains heavily state-controlled, with 90 percent of all loans directed to state-owned enterprises.